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Cowen says larger budget correction now required

Tue, Oct 19, 2010, 01:00

The planned budget cuts to deal with the country’s financial crisis are likely to be more severe than previously anticipated, Taoiseach Brian Cowen has admitted.

Speaking to reporters outside Leinster House, Mr Cowen said the economic growth assumptions made in previous projections had become "less robust."

"It's important we not get into specific figures but a significant correction has to be made over and above what was originally considered (in) the 2010 perspective for the years ahead," he said.

Fine Gael tonight accused the Government of deliberately covering up the true extent of the financial black hole facing the State.

Party leader Enda Kenny said he had lost all trust in Mr Cowen and his ability to reveal the true extent of the problem facing the country. The Opposition leader demanded the Exchequer figures are independently checked ahead of the Budget.

Not only was the economy being destroyed, but the Government were “wilfully concealing the truth of the extent of that destruction from the Irish people in what amounts to a national catastrophe”, Mr Kenny said.

The Taoiseach has offered to meet Mr Kenny and Labour leader Eamon Gilmore tomorrow night for round table talks on the four-year plan for cuts.

Mr Kenny said Fine Gael would play a part in tackling the financial crisis but warned it would no longer do so on the basis of information provided by the Taoiseach.

He said that if the government in another western democracy had acted in a similar fashion, it would have resigned in disgrace.

“Every figure produced by the Department of Finance, every figure produced by the Government has been wrong,” Mr Kenny said.

Department of Finance officials told Opposition parties yesterday that the scale of the adjustment to the public finances was likely to be close to €11 billion over four years, significantly more than the €7.5 billion initially considered.

The Fianna Fáil leader said he would meet leaders of the two main Opposition parties tomorrow in a bid to forge political consensus on a four-year plan for tackling the budget deficit, set to be unveiled next month.

Earlier, Minister for Health Mary Harney said cuts in health service funding next year could be up to €1 billion, significantly higher than previously indicated.

She said there was "no easy way to take that kind of money out" of the health service.

While cuts in health funding last year also amounted to €1 billion, much of that was accounted for by cuts in core pay to staff.

This year's cuts are more likely to come from other areas such as procurement, cutting services or perhaps staff overtime.

Ms Harney said she didn't want to be specific about the actual amount to be cut from health in December's budget but said: "It will certainly be a minimum of €600 million and it could well be substantially higher".

Up to now cuts of €600 million had been anticipated.

Asked if the cuts in health funding could go up to €1 billion, she said: "I'm not certain it will be that high but it will be somewhere between €600 million and a €1 billion".

Yesterday, opposition parties were told the crisis in the public finances is worse than feared and a package of spending cuts and tax increases of close to €5 billion could be on the cards for next year.

The finance spokespersons of Fine Gael, the Labour Party and Sinn Féin met senior officials from the Department of Finance in separate sessions for a briefing on the public finances.

They were told growth over the next four years was likely to be much lower than forecast and the adjustment to the public finances would be much greater than the €7.5 billion originally announced by Minister for Finance Brian Lenihan.

During the summer, the International Monetary Fund suggested a much bigger adjustment of more than €10 billion would be required but, according to Opposition sources, they were told yesterday it would be significantly greater than that and was likely to be more than €11 billion.

The general secretary of the Irish Congress of Trade Unions (Ictu), David Begg today reiterated his call to extend the time period to reduce the country's deficit.

Speaking on RTÉ News, Mr Begg said reducing the deficit to 3 per cent by 2014 cannot be achieved without causing permanent damage to the fabric of society.

"We simply can't manage to do this over a four-year period. Fiscal retrenchment on its own can't be achieved through just purely austerity. You need to have some growth in the system," he said.

"We have to get the fiscal situation in order but we need to do it over a period of time which doesn't prevent growth from taking hold and giving us a boost," he added.

The Fine Gael front bench today accused the Government of misleading the people over the state of the economy.

In a statement released this evening the party said the scale of the adjustments required to restore stability and confidence to the economy will be “unprecedented” and that the Government has consistently failed to “accurately forecast”.

“In the last two years the Minister for Finance and the Taoiseach, based on the evidence we now have, either didn’t know what they should have known or deliberately misled the people on the true state of the public finances they presided over.”

“Fine Gael is appalled and shocked at the concealment of the truth about what the economy now faces until the eleventh hour. It is time for a new government, where truth, trust and honesty replace deception, incompetence and ineptitude,” the statement read.

The party called for a number of economic experts to independently evaluate the data and formulate an economic plan in the public eye.

Mr Cowen said a Dáil debate on the economy would be held next week. In the Dáil today he defended the Government’s handling of the economy, claiming its actions had stabilised the public finances..

“The facts are that the decisions that we took . . . brought us from a position of contraction in the economy of over 10 per cent of GNP in 2009, to stabilisation this year,” Mr Cowen said.